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Bank deposits in Austria will no longer be protected by the state in the event that a bank fails, according to new legislation which will come into force in July.

According to a report in Die Presse, the plan to ensure that the state is no longer responsible for insuring deposits is something the Austrian government has been working on in conjunction with the EU for two years.

At the moment, Austrian bank account holders have their bank deposits guaranteed to a value of €100,000 – the first half to be provided by the failing bank and the other by the state.

From July the state will be removed from the process and a special bank deposit insurance fund is to be set up and paid into by banks to meet potential shortfalls.

The fund will be filled gradually over the next ten years to a value of €1.5 billion. In the event that a major bank fails in the next ten years the legislation will allow the fund to borrow internationally, although it is not clear who would provide such funding and on what terms.

The article in Die Presse points out that €1.5 billion only amounts to 0.8% of total deposits in Austria - so it seems highly unlikely that deposits of any major bank would be adequately covered, and if multiple banks were to fail at the same time then most savers would lose everything.

However Die Presse says that an inheritance, real estate transaction, dowry or divorce settlement will be protected for three months, up to an amount of €500,000.

Austria may have been prompted to enact the legislation in the wake of the failure of “bad bank” Heta.

Austrian banks are also exposed to potential losses from tougher sanctions on Russia, according to Fitch and the International Monetary Fund.